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On Friday, Oppenheimer increased its stock price target for Guidewire (NYSE:GWRE) shares to $200 from $185, while maintaining an Outperform rating. The firm's decision came in response to Guidewire's recent annual analyst day where the company outlined its financial targets for fiscal year 2028 and introduced new long-term margin goals.
During the event, Guidewire's Chief Financial Officer detailed medium-term objectives, aiming for $1.5 billion in Annual Recurring Revenue (ARR) by FY28, which translates to around a 16% compound annual growth rate (CAGR). This target aligns with what investors had anticipated. Moreover, the company has maintained its operating cash flow margin projection between 29-32%, and slightly increased its EBIT margin expectation to 28-29%.
Guidewire has shifted its strategy, choosing not to set new long-term ARR goals. Instead, the company provided potential long-term profitability targets, including an 80% subscription and support (S&S) gross margin and a 40% non-GAAP EBIT margin.
These figures surpass the mid-30% range that was previously expected. The journey to achieving a 40% EBIT margin is projected to be more linear, supported by a consistent 80%-plus incremental S&S margin and leverage from operating expenses.
The analyst firm views Guidewire as a top pick, citing its sustainable margin growth and robust ARR increase as key factors. The reiterated Outperform rating and new $200 price target reflect confidence in Guidewire's financial strategy and market position.
In other recent news, Guidewire Software Inc . has made significant strides in its financial performance. The company's fiscal 2025 guidance projects an impressive $1 billion in Annual Recurring Revenue (ARR), with total revenue expected to be between $1.135 billion and $1.149 billion. This promising trajectory is largely attributed to Guidewire's successful transition to a cloud-based platform.
In line with these developments, several analyst firms, including Baird, RBC Capital, BTIG, Goldman Sachs, and Oppenheimer, have either maintained or upgraded their ratings on Guidewire. Specifically, Baird has reiterated its Outperform rating, while RBC Capital has raised its price target to $215, citing Guidewire's ambitious long-term profitability targets and maturing cloud product offerings.
On a different note, the company expanded its board of directors with the appointment of Mark Anquillare, former President and COO of Verisk Analytics (NASDAQ:VRSK). However, Guidewire was also implicated in a hacking incident involving a British individual, Robert Westbrook, who was arrested on charges of hacking into several companies, including Guidewire, for insider trading information.
InvestingPro Insights
Guidewire's recent analyst day has not only caught the attention of Oppenheimer but also aligns with several key metrics and insights from InvestingPro. The company's market capitalization stands at $15.22 billion, reflecting its significant presence in the insurance software sector.
InvestingPro data shows that Guidewire's revenue for the last twelve months as of Q4 2024 was $980.5 million, with a growth rate of 8.3%. This growth trajectory supports the company's ambitious target of reaching $1.5 billion in Annual Recurring Revenue by FY28, as outlined in their analyst day presentation.
Two relevant InvestingPro Tips highlight Guidewire's current market position. Firstly, the stock is trading near its 52-week high, which aligns with Oppenheimer's optimistic outlook and increased price target. Secondly, analysts predict that the company will be profitable this year, supporting the firm's positive stance on Guidewire's financial strategy and market position.
It's worth noting that InvestingPro offers 11 additional tips for Guidewire, providing a more comprehensive analysis for investors looking to delve deeper into the company's prospects.
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